Pass v. Shelby Aviation (Supp.) Chapter 9: Introduction to Contracts• Facts

o Max Pass owned and piloted a single engine Piper airplaneo On April 15, 1994 Pass and his wife left Florida in the plane bound for Tennessee.

Somewhere over Alabama, the couple flew into turbulence, Pass lost control of the plane and it crashed to the ground in Alabama, killing the Passes.

The administrators of the Passes’ estates brought a lawsuit for breach of express and implied warranty under the UCC against Shelby Aviation, which is a fixed-base operator that services aircraft at an airport in Tennessee.

o 4 ½ months before the Passes’ fatal flight, Pass took his plane to Shelby aviation for inspection and service. In servicing the plane, Shelby Aviation replaced both rear wing attach point brackets.

The Passes’ estates claimed that the rear wing attack point brackets sold and attached by Shelby Aviation were defective because they lacked the bolts necessary to secure them to the plane.

• Complaint stated that Shelby Aviation employees failed to provide and install the bolts and that the missing bolts resulted in a failure of both wings of the plane to withstand the torque applied to an aircraft during turbulence, leading to Pass’s loss of control of the plain and ultimately causing the crash.

o Shelby filed for a motion to dismiss, arguing that its contract with Pass had been primarily for the sale of services, rather than goods, and so the transaction was not covered by the UCC.

o Trial court ruled against Shelby Aviation. Shelby Aviation appealed.• Issues

o Does the contract between Pass and Shelby Aviation fall under common contract law or the UCC

• Holdingso Reversed and Remanded for Shelby Aviation

“Gravaman test” and “predominant factor” test both used to determine whether something governed by UCC or Common Law.

• Gravaman Test – looks at the portion of the transaction upon which the complaint is based, to determine if it involved goods or services.

• Predominant factors test – looks at the transaction as a whole to determine whether it involved goods or services.

o In this case, if it falls under goods, warranty will be applicable, if it falls under services, warranty will not be applicable.

Court determined that Shelby Aviation is a service business and it is clear that Pass took his airplane to Shelby to have service performed.

Hurdis v. Town of North Providence (Supp.) Chapter 9: Introduction to Contracts• Facts

o Hurdis Realty owns a building situated at the corner of Charles Street and Mineral Spring Avenue in North Providence. Frank Hurdis, president of Hurdis Realty, was informed that the sewage was not flowing properly from the building.

o Hurdis employed a plumber who determined that the cause of the blockage was located past Hurdis Realty’s property line somewhere under Mineral Spring Avenue.

Hurdis proceeded to the North Providence town hall where he requested that the town council president remedy the problem.

The council president stated that before he could order any repair work, he needed a report from the sewer superintendent. The superintendent went to the site, but failed to observe a blockage.

o Hurdis hired a private sewer contract who located a blockage caused by a broken pipe Under Mineral Spring Avenue. Hurdis obtained a permit to excavate and the private contractor repaired the damaged pipe.

o Hurdis spent $4,773.29 on repairs and presented its clam for reimbursement to the town council. The claim was not satisfied.

o Hurdis realty sued Town of North Providence under a quasi-contract theory. Trial court held for Hurdis

o Case was appealed to Supreme Court of RI• Issues

o Was there a quasi-contract between Hurdis and Town of North Providence• Holdings

o Decision affirmed A municipality may be liable upon the principle of unjust enrichment

when it has enjoyed the benefit of work performend and when no statute forbids or limits its power to contract therefore.

Town is empowered to assess users of the sewer system and utilize the revenues for maintenance of the system. Plaintiff spent its own funds to repair a damaged portion of the town’s sewer lines. The plaintiff clearly conferred a benefit upon the town and fulfilled what was essentially the town’s responsibility.

It would be unfair for town to benefit from the plaintiff’s work without having to pay the value of the benefit.

Holt v. Home Depot, USA, Inc. (Supp.) Chapter 9: Introduction to Contracts• Facts

o Bruce Holt worked as a manger for Home Depot from 1995-1999. Throughout those years, Home Depot ensured employees through statements in the employee handbook and other means of communication that if they took advantage of the company’s open-door procedure to complain to management about their supervisors, they would not be penalized.

o In 1999, Home Depot sent Holt to Connecticut so he could manage a new distribution center.

o Soon after he started there, he began having difficulties and disagreements with his immediate supervisor, Ms. Gray.

Holt contacted a senior manager, Brian Bender, regarding his problems with her. He later called Hope Depot’s Impact Line to ask that forms be sent to him so he could make a formal complaint.

Later in the month, two senior Home Depot managers went to the distribution center accompanied by Gray and terminated Holt’s employment.

o Holt sued Home Depot claiming Promissory Estoppel. Jury found in his favor and awarded him compensatory damages.

Home Depot moved for relief of several kinds, including judgment as a matter of law and a new trial.

• Issueso Was Home Depot liable for Promissory Estoppel

• Holdingso Home Depot’s motions denied in favor of Holt

In order to win this claim, Holt must prove:• Home Depot made a clear, definite promise that it would not

retaliate against employees for using its internal complaint procedure.

• Home Depot reasonably should have expected plaintiff to rely on the promise

• He did reasonably rely on it• His employment with Home Depot was terminated as a result• Enforcement of the promise is necessary to prevent injustice.

Court found that all of these things were true.

Meram vs. MacdonaldFacts

• Allianz Sales invited Frank Meram to attend a presentation on September 29, 2005 to meet Robert McDonald, who was presenting his new book “Cheat to Win.”

• McDonald was a multimillionaire who built LifeUSA, a billion dollar company which was owned by Allianz at the time of the presentation

• Meram, along with 100 other financial representatives, were in attendance at the presentation

• At the beginning of the presentation, McDonald announced that one of the attendees would leave, that day, with 1 million dollars.

o All that was required was to place a business card in the basket that was being passed around and to stay for the entirety of the presentation

o Meram placed his business card in the basket and attended the presentation until the end.

• At the end of the presentation, McDonald pulled Meram’s business card out of the basket.o McDonald stated that Meram would receive: “1 dollar a year for a million years.”o McDonald gave Meram $100 in cash to cover the first 100 years.

• According to McDonald, all Meram had to do was attend a presentation once a year to claim the rest of the million dollars.

• Meram filed an action for breach of contract against MacDonald and Allianz, seeking the remainder of the promised one million dollars.

o The defendants moved to dismiss Meram’s case for failure to state a claimProcedural History – what happened at each level of court: who won? What was the decision?

• Case filed in U.S District court of San Diego, California• Issue – question that the court has to answer

• Whether, under the circumstances, a reasonable person would conclude from the words and conduct of each party that there was an agreement.

• Whether or not there was an objective standard of intent• Was there a valid contract created?

• Offer was too good to be true and Meram could not have reasonably concluded that the offer was for a million dollars.

• Was the offer specific/definite in the terms of the alleged offer?• Holding – how the court answered the issue

• Judge Lorenz• Motion to dismiss the action for breach of contract denied in favor of Meram

• Issue: Offer was too good to be true and Meram could not have reasonably concluded that the offer was for a million dollars. Was there a valid contract created?

• Reading the allegations in light most favorable to the plaintiff, the allegations do not lead to an inescapable conclusion that the offer was a joke or that McDonald meant anything other than what he said.

• The court can not conclude that no reasonable person could conclude that the offer was genuine – objective standard of intent - looks at the impression that the offer has given to the rest of the world through is words and conduct and the surrounding circumstances

• What it means: Court said that no reasonable person wouldn’t believe that the offer wasn’t real

• Therefore, Meram sufficiently alleged the offer and its terms.Armstrong vs. Rohm & Haas Co. Chapter 10: Definiteness of Contract (337)

• Factso Robert Armstrong and Marc Pottle worked for Morton International as ceramic

grinders at its facility in Spencer, Massachusetts. In 1999, Rohm and Hass (RH) acquired Morton and announced that it would close the Spencer facility.

RH gave Morton employees 1 month to decide whether to accept a severance package and quit their jobs. Employees who chose instead to transfer to the Woburn facility would receive an incentive payment larger than the payment offered as part of the severance package.

o Armstrong and Pottle wanted to remain with the company, but Thomas Payne, the plant manager at the Spencer facility, suggested they could make substantially more money if they resigned, accepted the severance package, and started their own company to handle RH’s outsourced grinding work.

At the time of Payne’s statements, the grinding work was being outsourced to a company called Chand Associates, and Payne indicated that the company wanted to end its dependence on Chand.

Payne represented to Armstrong and Pottle that the company would give their new business “all the work they could handle” and that the company “would like to” give the plaintiffs “all of its outsourced work in ceramic grinding, which had been in the neighborhood of $10,000/month”

o In reliance on Payne’s representations, Armstrong and Pottle resigned from RH and accepted the severance package.

After their resignations, Armstrong and Pottle invested in shop space and tools so that they could begin handling RH’s outsourced work.

During the first few months after the resignations of Armstrong and Pottle, RH gave them a small amount of work and assured them that it was all the work that was available because of a decrease in production.

• This trend continued into late 2001 when Pottle accepted a job with Chand due to the lack of work in his new business. When he began to work for Chand, he discovered that RH was still outsourcing large amounts of grinding work to Chand.

o Armstrong and Pottle filed suit against RH on a number of grounds, including breach of contract. RH filed a motion to dismiss for failure to state a claim upon which relief can be granted.

• Issueso Was their definiteness of terms to constitute a contract when the plant manager

promised Armstrong and Pottle all the work they could handle if they accepted the severance packages

• Holdingo Motion to dismiss granted in favor of RH

Defendant’s (RH) promise is too vague for this court to ascertain a reasonably certain basis for providing an appropriate remedy.

It is unclear what the volume of work was to be performed – that is, what the parties meant by the phrase “all the work” plaintiffs could “handle”

• No set amount of work to be given to Armstrong and Pottle, no price set for finished products, no quality levels set, no set duration of contract

Oral contract is too imprecise to be enforceable as a matter of law. Armstrong and Pottle’s claim for breach of oral contract will be dismissed

for failure to state a claim.Lucy vs. Zehmer (supp) Objective Theory of Contracts with respect to intent

• Factso Lucy wanted to buy Zehmer’s farm. Lucy visited Zehmer at his restaurant. After

consuming alcohol, Lucy bet Zehmer, “I bet you wouldn’t take $50,000 for that place.” And Zehmer agreed.

o Lucy said he told Zehmer to write up a contract. Zehmer took a restaurant check and wrote on the contract on the back of it. At Lucy’s urging, Zehmer changed the wording to “we” because Zehmer’s wife needed to sign it, too. His wife originally

refused but eventually signed it when Zehmer insisted her that it was a joke and that he wasn’t selling the farm.

o Lucy engaged an attorney to examine the title and the attorney deemed that the contract was satisfactory. He asked Zehmer when he would be ready to close the deal. Zehmer replied by letter, stating that he had never agreed or intended to sell.

Zehmer said he prepared the contract as a bluff or dare to force Lucy to admit that he did not have $50,000

The whole thing was a joke; no binding contract was ever made between the parties

o W.O Lucy and J.C Lucy, plaintiffs, sued A.H Zehmer and Ida S. Zehmer, the defendants, to have the contract enforced (specific performance).

o Court found for the Zehmers The Lucy’s appealed to the Supreme Court of Virginia

• Issueso Was there an actual contract made between Lucy and Zehmer

• Holdingo Plaintiffs are entitled to have specific performance of the contract. The original

decision is reversed and the defendants are required to perform the contract. Zehmer was not drunk enough that he couldn’t comprehend the nature and

consequences of the contract he wrote. Cannot blame that he was to drunk. Its not about what someone intended, it is the actions that the person

took. A person cannot say that he was joking when his actions and words would

warrant a reasonable person in believing that he intended a real agreement. The price offered (50,000) was a fair price because the farm had been

bought for 11,000.

Leonard vs. Pepsico (supp) Advertisements and Definiteness of Contract• Facts

o Leonard saw a “Pepsi Stuff” commercial encouraging consumers to collect “Pepsi Points” from specially marked packages of Pepsi and redeem these points for merchandise featuring the Pepsi logo.

o Leonard saw commercial stating that a harrier jet could be purchased with 7,000,000 Pepsi points. Inspired by this commercial, Leonard set out to get a Harrier Jet. Leonard consulted the Pepsi Stuff catalog and did not see any entry or description of the Harrier jet on the catalog order form.

o The catalog notes that in the event that a consumer lacks enough Pepsi Points to obtain a desired item, additional Pepsi points may be purchased for 10 cents each; however, at least 15 original Pepsi points must accompany each order.

o Leonard originally set out to collect 7,000,000 Pepsi points but realized he could not buy or consume enough Pepsi products fast enough. On March 15, 1996, Leonard submitted an Order Form, 15 original Pepsi points, and a check for $700,008.50. On the order form, Leonard wrote “1 Harrier jet.” In a letter accompanying his submission, he stated that the check was to purchase additional

Pepsi Points for obtaining a new Harrier jet as advertised in the Pepsi Stuff commercial.

o Pepsico rejected Leonard’s submission and returned the check, explaining that the item he requested was not part of the Pepsi Stuff collection, and only catalog merchandise could be redeemed under this program.

o Leonard sued Pepsico for breach of contract. Pepsico filed a declatory judgment action. Pepsico moved for summary

judgment.• Issues

o Is an advertisement enough to be considered a contract?• Holding

o Motion for summary judgment granted in favor of Pepsico The general rule is that an advertisement does not constitute an offer. An

advertisement is not transformed into an enforceable offer through completion of an order form.

No enforceable contract until Pepsico accepted the Order Form and cashed the check.

The exception to the rule that advertisements do not create any power of acceptance in potential offerees is where the advertisement is clear, definite, and explicit, and leaves nothing open for negotiation.

Pepsi commercial is different because it is not definite, because it specifically reserved the details of the offer to a separate writing, the Catalog.

Commercial made no mention of the steps a potential offeree would be required to take to accept the alleged offer of a Harrier jet.

Even if harrier jet was on catalog, the advertisement of the harrier ket by both the television commercial and catalog would still not constitute an offer due to the absence of any words of limitation such as “first come, first served” renders the alleged offer sufficiently indefinite that no contract could be formed.

No objective person could have reasonably concluded that the commercial actually offered consumers a Harrier jet.

• Can’t consider the subjective views, must consider the objective view of a reasonable person.

Sales Puffery – when advertisements make exaggerated claims such as, by consuming the featured clothing, car, beer, or potato chips, one will become attractive, stylish, desirable, and admired by all.

• Reasonable viewer wouldn’t believe these statements are fact.

Adsit Co. vs. Gustin (supp) Chapter 11 Contracts: The Agreement• Facts

o Adsit is an Indiana-based retailer of new, used, and rebuilt parts and accessories for Mercedes-Benz automobiles. Does business over the phone and internet.

o Mary Gustin lives in Texas, Mary’s daughter in law Julie lives in Alabama. Julie’s husband, Kevin, owned a classic 1967 Mercedes roadster. Mary wanted to buy leather seat covers and armrest covers for the car.

o Prior to placing an online order through Adsit, a customer must click a button reading “I accept” after reading a web page describing the company policy.

The Policy stated that there would be absolutely no refunds or returns, that there was a warranty for 30 days on an exchange basis, and that all sales were final. The policy also included a forum selection clause.

• Agreement on Jurisdiction to Damages – Adsit and customers agree that any suit, claim, or legal proceedings of any nature between the parties must be filed and prosecuted in Deleware County, Indiana and shall be controlled by the laws of the State of Indiana then in effect.

o The page of Adsit’s web site regarding seat upholstery states that if you have any questions about the color of your interior, please supply us with your vin#; all interior items are special order and nonreturnable so please order carefully.

o On December 15, 2004 Mary placed an order on Adsit’s website for two camel-colored leather seat covers and two camel-colored leather armrest covers. She provided the Vin# but wrote down an incorrect number.

o Mary originally placed the order with her credit card and shipped it to Julie and Kevin’s address but Adsit needed the credit card to match the shipping address so Julie agreed to have the purchase charged to her card.

o Julie and Kevin received the goods on January 22, 2005. At that time, they discovered that the color of the seat covers did not match their vehicle’s interior. Within 6 days of receiving the seat covers, Julie and Kevin returned them to the California address from which they were sent. They sent the seat covers via certified US mail and received confirmation of the delivery. The also reversed the charge on their credit card.

A representative of Adsit testified that the company did not receive the goods.

o On July 12, 2005, Adsit filed a breach of contract complaint against Julie, later adding Mary as a defendant. Following a trial, the court entered judgment for Adsit, but awarded a smaller amount of money than Adsit thought it was entitled to. Adsit and Mary and Julie appealed.

Among the Gustins’ arguments on appeal was that the Indiana court lacked jurisdiction over Mary and Julie, both of whom lived in other states.

• Issueso Whether the trial court properly exercised personal jurisdiction over the Gustins.

Are clickwrap agreements enforceable• Holding

o Decision affirmed (confirmed) in favor of Adsit Forum selection clauses are enforceable if they are reasonable and just and

there is no evidence of fraud or overreaching.

• To complete the transaction, Mary was required to click the button “I accept.” This type of web-based contract is commonly referred to as a “clickwrap.”

• Mary was had reasonable notice of the contract and was capable of understanding its terms, consented to them, and could have rejected the agreement with impunity (freedom)

Whether or not the forum selection clause binds Julie is a closer call.• Julie’s only role in the transaction was to provide her credit card

number for Mary to use, she never accepted the terms of the transaction.

• However if Mary was acting as Julie’s agent, then Julie is bound by the forum selection clause. Although the record does not reveal the precise nature of the communication between Mary and Julie regarding the purchase from Adsit, it is undisupted that Julie did provide Mary with her credit card number so that Mary could complete the purchase. Julie’s conduct twas sufficient to give Mary actual authority to engage in the transaction on her behalf.

o Consequently, Julie is likewise bound by Adsit’s forum selection clause.

McCune v. Myrtle Beach Indoor Shooting Range (Supp.) Chapter 15 Contracts: Illegality• Facts

o Christine McCune went to the Myrtle Beach Indoor Shooting Range to participate in a paintball game with her husband and friends. Before being allowed to participate, McCune signed and dated a waiver that purported to release the Range from liability for all known or unknown dangers for any reason with the exception of gross negligence on the part of the Range.

o During her paintball session, McCune used a mask provided by the Range. During her play, the mask was loose and ill fitting. She tried to have the mask tightened or replaced several times and an employee of the Range attempted to properly fit the mask for McCune.

o While playing in a match, McCune caught the mask on the branch of a tree. The tree was obscured from her field of vision by the top of the mask. The mask was raised off her face because it was loose and provided no protection against an incoming paintball pellet.

o The pellet struck McCune in the eye, rendering her legally blind in the eye. o McCune brought a negligence suit against the Range.

The Range filed a motion for summary judgment, alleging the waiver barred liability on its part.

o Court granted the Range’s motion, McCune appealed.• Issues

o Was the Range liable for McCune’s injury and was the Range’s negligence what caused McCune’s injury

• Holdingso Decision Affirmed (confirmed) in favor of the Range

McCune asserts she did not anticipate the harm that was inflicted or the manner in which it occurred. She contends the failure of the equipment was unexpected and she could not have voluntarily assumed such a risk.

• Court disagrees, express assumption of risk is contrasted with implied (unstated/understood) assumption of risk, which arises when the plaintiff implicitly, rather than expressly, assumes known risks.

McCune expressed assumption of the risk by signing the release form prior to participating in the paintball match. The release form in the case explicitly and unambiguously limited the Range’s liability.

• The agreement was voluntarily signed and specifically stated: (1) she assumed the risks, whether known or unknown and (2) she released the Range from liability, even from injuries sustained because of the Range’s own negligence.

It is clear that McCune voluntarily entered into the release in exchange for being allowed to participate in the paintball match. Additionally, she expressly assumed the risk for all known and unknown risks while participating and cannot now complain because she did not fully appreciate the exact risk she faced.

As in Huckaby vs. Confederate Motor Speedway, Inc. “If these agreements, voluntarily entered into, were not upheld, the effect would be to increase the liability of those organizing or sponsoring such events to such an extent that no one would be willing to undertake to sponsor a sporting event.”

Gottlieb v. Tropicana Hotel & Casino (Text) Chapter 12: Consideration• Facts

o During the summer of 1999, Rena and Sheldon Gottlieb were vacationing in Atlantic City, New Jersey and on July 24, they visited the Tropicana casino

o Tropicana offers people membership in its “Diamond Club.” To become a Diamond Club member, an individual must visit a

promotional booth in the casino, obtain and fill out an application form, and show identification. There is no charge. The application form lists the person’s name, address, telephone #, and email address. This information is entered into the casino’s computer database.

o Each member receives a Diamond Club card that has a unique id number, The member then presents or “swipes” the card in a machine each time he or she plays a game at the casino, and the casino obtains information about the member’s gambling habits. The casino’s marketing department then uses that information to tailor its promotions.

o Rena Gottlieb was, and has for a number of years, a member of the Diamond Club. When she entered the casino on July 24, she immediately went to the Fun House Million Dollar Wheel Promotion, which offers participants the chance to win a grand prize of $1 million.

Diamond Club members were entitled to one free spin of the Million Dollar Wheel each day.

o Rena presented her Diamond Club card, a casino operator swiped it through the card reader, she pressed a button to activate the wheel, and the wheel began spinning.

Gottlieb claims that the wheel landed on the $1 million grand prize, but when it did so, the casino attendant immediately swiped another card through the machine, reactivated the wheel, and the wheel landed on a prize of two show tickets.

o Tropicana denies that its attendant intervened and reactivated the wheel, and contends that the wheel simply landed on the lesser prize.

o Ms. Gottlieb sued Tropicana for breach of contract, among other theories, and Tropicana moved for summary judgment.

• Issues o Was there consideration that would constitute an enforceable contract between

Rena Gottlieb and Tropicana Hotel.• Holding

o Motion for summary judgment on the contract claim denied in favor of Ms. Gottlieb

In Cobaugh vs. Klick-Lewis, Inc. the Supreme Court of Pennsylvania decided that there was adequate consideration to form a binding contract where a golfer, who was participating in a tournament, shot a hole-in-one after seeing a contest announcement offering a new car to anyone who could ace the particular hole. The court noted that the promisor benefited from the publicity of the promotional advertising, and the golfer performed an act that he was under no legal obligation to perform.

• Ms. Gottlieb had to go to the casino to participate in the promotion. She had to wait in line to spin the wheel. By presenting her Diamond Club card to the casino attendant and allowing it to be swiped into the casino’s machine, she was permitting the casino to gather information about her gambling habits.

• Additionally, by participating in the game, she was a part of the entertainment that casinos, by their very nature, are designed to offer to all of those present. All of these detriments to Ms. Gottlieb were the requested detriments to the promise induced by the promise of Tropicana to offer her a chance to win $1 million.

• Tropicana’s motives in offering the promotion were “in nowise altruistic.” It offered the promotion in order to generate patronage of and excitement within the casino.

In short, Ms. Gottlieb provided adequate consideration to form a contract with Tropicana.

Tropicana further challenges Ms. Gottlieb’s breach of contract claim on the grounds that it is clear as a matter of law that she did not win the $1 million prize. It is for the jury, and not for the court, to resolve this factual dispute.

Heye v. American Golf Corp. (Supp.) Chapter 12 Contracts: Consideration

• Factso In March 1999, American Golf Corporation hired Melissa Heye for a job in the

pro shop at the Paradise Hills Golf Course. On March 19,1999, after Heye was hired but before she began working, AGC gave Heye a number of documents, including the Co-Worker Alliance Handbook. On pg 20 of the handbook was a reference to arbitration that essentially stated that binding arbitration would be the exclusive means of resolving all disputes about unlawful harassment, discrimination, wrongful discharge, and other causes of action and that the employee was agreeing to waive her right to pursue such claims in court.

o Heye was required to sign indicating that she had read this agreement and handbook and agree to abide by its terms and conditions.

o Heye worked for AGC until January 2000. She later sued AGC on a variety of grounds, including sex discrimination and sexual harassment. AGC moved to compel arbitration under the acknowledgement form that Heye signed. The trial court initially granted this motion, but after Heye filed a motion for reconsideration, the trial court denied AGC’s motion. AGC appealed

• Issueso Was Heye subject to the arbitration agreement that she agreed to when signing her

contract.• Holdings

o Denial of motion to compel arbitration (affirmed) confirmed in favor of Heye AGC points to language on pg 20 of the handbook stating that arbitration

is the exclusive means of resolving any dispute.• Heye counters that the language on pg 20 conflicts with that of the

acknowledgment form on pg 23o The language on pg 23 provides that the company reserves

the right to amend, supplement, rescind or revise any policy practice or benefit described in this handbook. As a result, Heye contends AGC is free to amend, supplement, rescind or revise the policy regarding arbitration at its whim.

o Heye concludes that at best, AGC is left with conflicting and therefore ambiguous, terms regarding its ability to unilaterally change the contract.

o Court disagrees with AGC that it was legally obligated to arbitrate all claims. The agreement provided in effect that only one thing would remain

unchangeable, namely Heye’s at will employment status. It expressly reserved for itself the right to amend, supplement, rescind or revise any policy, practice, or benefit described in this handbook as it deems appropriate.

o The agreement in essence gives AGC unfettered (unrestricted) discretion to terminate arbitration at any time, while binding Heye to arbitration.

AGC remains free to selectively abide by its promise to arbitrate the promise, therefore, is illusory (misleading).

o AGC’s promise to arbitrate does not provide the consideration necessary to enforce the arbitration agreement.

Ross v. May Company (Supp.) Chapter 12 Contracts: Consideration• Facts

o Gary Ross was employed by May company. When Ross went to work for May in 1968, he was given an employee handbook that described particular steps that had to be taken before an employee could be fired.

o In addition, a May manager told Ross that he would have a job as long as he wanted to work. Later on however, in 1987 or 1989, May published a new handbook that contained disclaimers of any rights to continued employment that its employees might have. One of these disclaimers was that employees were now considered employees-at-will and could be terminated at any time without any procedures. This new handbook also gave employees new benefits.

o After working for May for more than 40 years, Ross got in trouble for drawing stick figures depicting a female co-worker being electrocuted, boiled, guillotined, etc.

o The co-worker’s son brought the pictures to the attention of May Company, who suspended Ross and told him to see a psychologist.

o Ross alleged that after 2 visits, the psychologist found he was not a threatening individual and determined that he required no treatment other than perhaps treatment for depression resulting from the suspension and possible job loss.

o Shortly thereafter, May fired Ross. Ross claimed he was terminated without cause and was not afforded procedures described in the 1968 handbook, such as an appeal or review of the decision.

o Ross sued May Company under a theory of breach of contract based upon the 1968 employee handbook.

o The trial court dismissed Ross’s claim stating that the new benefits included in the new handbook that Ross accepted counted as consideration for Ross becoming an at-will employee.

o Ross appealed• Issues

o Was there a breach of contract when May terminated Ross without allowing Ross to go through the procedures in the old handbook. Did Ross offer consideration for becoming an at-will employee by accepting the new benefits.

• Holdingo Reversed in Favor of Ross

Supreme court crafted an exception to at-will employment where an employee handbook or other policy statement creates enforceable contractual rights if the traditional requirements for contract formation are present.

3 requirements must be met for an employee handbook or policy statement to form an employee contract

• The language of the policy statement must contain a promise clear enough that an employee would reasonably believe that an offer has been made.

• The statement must be disseminated (distributed) to the employee in such a manner that the employee is aware of its contents and reasonably believes it to be an offer.

• The employee must accept the offer by commencing or continuing to work after learning of the policy statement.

• If these requirements are met, the employee’s continued work constitutes consideration for the promises contained in the statement, and under traditional principles a valid contract is formed.

o Trial court determined that new benefits May offered to Ross and his coemployees in 1990 constituted consideration for the unilateral modification of Ross’s employment contract.

Court claims that Ross accepted the new benefits of the new employee handbook and in turn agreed to a new contract

• Ross agrees that he experienced benefits of the new employee handbook. However, he maintains that the new benefits he received from May did not serve as consideration supporting the unilateral modification of his employment contract because they were offered to all eligible employees and there was never any bargained-for exchange between him and May in which he agreed to modify or terminate his contract rights in exchange for the benefits.

No contract can be modified or amended in “ex parte” fashion by one of the contracting parties without the knowledge and consent of the remaining party to the agreement. A valid modification must satisfy all criteria essential for a valid contract, including offer, acceptance, and consideration.

• The essential element of consideration is a bargained-for exchange of promises or performances that may consist of a promise, an act, a forbearance (tolerance), or the creation, modification, or destruction of a legal relation. A bargained-for exchange exists if one party’s promise induces the other party’s promise or performance.

• A performance or return promise is bargained for if it is sought by the promisor in exchange for his promise and is given by the promise in exchange for that promise.

In the employer-employee context, consideration will be found when an employer and its employees make a bargained-for exchange to support the employees’ relinquishment of the protections they were entitled to under the existing contract.

o May did not bargain for Ross to modify his employment status and become an at-will employee. No bargained-for exchange and no promises were made where Ross agreed to relinquish his contractual rights in exchange for the new benefits.

The additional benefits were in no way related to, bargained for, or referenced to any preexisting contractual rights.

May acted unilaterally (individually) not in a bargained-for exchange, when it offered the additional benefits to its employees.

No consideration flowed from May to Ross to compensate him for relinquishing his protections he enjoyed under the 1968 employee handbook.

o Mere employment, standing alone, does not constitute consideration supporting the unilateral modification of an existing employment contract. The trial court erred in dismissing Ross’s breach of contract claim.

Calabro v. Calabro (Supp.) Chapter 12 Contracts: Consideration• Facts

o Hope Calabro is the daughter of Arthur Calabro. Hope’s mother and father were divorced when Hope was 4 years old. Hope lived with her mother in Oklahoma while her father lived in Memphis. He provided financial support to Hope while she was living with her mother. While Hope was growing up, Arthur saw her during summers and on some holidays.

o Hope had an excellent academic record in high school, during her senior year, Arthur offered to pay for Hope’s expenses to attend a distinguished private university if she received at least $10,000 in financial aid.

o At the time that Hope was applying to colleges, she knew that she was eligible to attend the University of Oklahoma and receive a full scholarship, but knowing that her father would be willing to finance her college education at a private college if she received $10,000 in financial aid, Hope applied and was accepted at a lot of private schools. Several of these schools offered her financial aid.

o In the fall, Hope enrolled in Vanderbilt University with her father paying expenses that exceeded her scholarship. During Christmas break, Arthur informed Hope that he was no longer willing to pay for her college expenses, At that time he had prepaid her tuition for spring semester at Vanderbilt.

o Hope continued to attend Vanderbilt and completed her coursework, earning a B.A in psychology, Hope financed the remainder of her education by taking out student loans that became due upon her graduation.

o Hope brought a breach of contract suit against Arthur, claiming that he had breached a contract to pay for her college expenses that exceeded her scholarship.

o The trial granted a summary judgment in favor of Arthur, and Hope appealed.• Issues

o Was there a binding contract between the parties that Arthur breached.• Holdings

o Summary judgment reversed and remanded in favor of Hope (case must be retried)

Hope asserts that she undertook to do something that she was not legally obligated to do, thereby providing the consideration needed to form a contract. She asserts that Arthur received a benefit by having his daughter close to him and away from her mother’s influence as well as having a well-educated daughter.

Hope states that she gave up substantial scholarships and financial aids at other universities to attend Vanderbilt.

• Hope asserts that these forgone opportunities along with the substantial expense she incurred to attend Vanderbilt, constitute a legal detriment to her as promise and consideration for her father’s promise to pay her education expense.

Arthur claims that as a parent he has no legal obligation to pay for the educational expenses of a child that has reached the age of majority. Arthur asserts that he did not intend to enter a contract that obligated him to pay for college expenses but merely desired to help his daughter realize the dream that she expressed to him of becoming a doctor.

• Even if his generosity could be construed as an obligation, it is moral rather than legal

For there to be a consideration in a contract between parties to the contract it is not necessary that something concrete and tangible move from one to the other. Any benefit to one and detriment to the other may be a sufficient consideration.

• A benefit to the promisor and detriment to the promise might be inferred this will constitute a valid consideration.

• Consideration exists when the promise does something that he is under no legal obligation to do or refraims from doing that which he has a legal right do to.

o Simply stated, Hope’s evidence from her deposition testimony is that Arthur promised to pay her tuition and expenses over and above the $10,000 scholarship if she attended Vanderbilt.

There is a dispute as to whether a benefit was conferred on Arthur on his promise to pay the tuition and whether Hope suffered a detriment in her performance of the contract or agreement.

Hope also relies upon the doctrine of promissory estoppel • Promissory Estoppel – In numerous situations, one person may

rely on a promise made by another even though the promise and surrounding circumstances are not sufficient to justify the conclusion that a contract has been created because one or more of the required elements is missing. To allow the person who made such a promise (the promisor) to argue that no contract was created would sometimes work an injustice on the person who relied on the promise (the promisee)

• Detrimental action or forbearance (restraint) by the promise in reliance on a gratuitous promise, within limits, constitutes a substitute for consideration, or a sufficient reason for enforcement of the promise without consideration.

• The limits of promissory estoppel are (1) the detriment suffered in reliance must be substantial in an economic sense (2) the substantial loss to the promisee in acting in reliance must have

been foreseeable by the promisor (3) the promisee must have acted reasonably in justifiable reliance on the promise as made.

Dodson v. Shrader (Supp.) Chapter 14 Contracts: Capacity• Facts

o Joseph Dodson, 16, bought a 1984 Chevrolet truck from Burns and Mary Shrader, owners of Shrader’s Auto Sales, for $4900 cash.

o At the time of the sale, Burns Shrader, believed Dodson was 18 or 19 and did not ask Dodson’s age and Dodson did not volunteer it.

o Dodson drove the truck for 8 months when he learned from a mechanic that there was a burned valve in the engine. Dodson did not have money for repairs so he continued to drive the truck without repair for another month until the engine “blew up” and stopped operating

o Dodson parked the car in the front yard of his parent’s house. He called Shrader, rescinding (revoking) the purchase of the truck and requesting a full refund. The Shraders refused to accept the truck or to give Dodson a refund.

o Dodson filed an action seeking to rescind the contract and recover the amount paid for the truck. Before the court could hear the case, a hit-and-run driver struck Dodson’s parked truck causing damage to its left front fender.

o At the time of trial, the truck was only worth $500. The Shraders argued that Dodson should be responsible for paying the difference between the present value of the truck and the $4,900 repurchase price.

o Trial court found in Dodson’s favor, ordering the Shraders to refund the $4900 purchase price upon delivery of the truck

o Tennessee Court of appeals affirmed the judgmento Shraders appealed to the Tennessee Supreme Court

• Issueso Did Dodson have protection under the “infancy doctrine” of Capacity from his

contract he signed to buy the car and did he deserve to get all his money back.• Holding

o Reversed and remanded in favor of the Shraders Purpose of “infancy doctrine” to protect minors from their lack of

judgment and from squandering their wealth through contracts with crafty adults who would take advantage of them in the marketplace.

• However, a modern trend is that courts are trying to balance the rights of minors against those of innocent merchants.

2 minority rules have developed which allow the other party in a contract with a minor to refund less than the full consideration paid in the event of rescission.

• Benefit Rule – holds that, upon rescission, recovery of the full purchase price is subject to a deduction for the minor’s use of the merchandise.

o Merchandise must me in the same shape and quality when being returned as when being sold in the initial transaction

• Minor’s recovery of the full purchase price is subject to a deduction for the minor’s “use” of the consideration he or she received under the contract, or for the “depreciation” or “deterioration” of the consideration in his or her possession.

We state the rule to be followed hereafter, in reference to a contract of a minor, to be where the minor has not been overreached in any way, and there has been no undue influence, and the contract is a fair and reasonable one, and the minor has actually paid money on the purchase price, and taken and used the article purchased, that he ought not to be permitted to recover the amount actually paid, without allowing the vendor of the goods reasonable compensation for the use of, depreciation, and willful or negligent damage to the article purchased, while in his hands.

• If there has been any fraud or imposition on the part of the seller or if the contract is unfair, or any unfair advantage has been taken of the minor inducing him to make the purchase, then the rule does not apply.

• If minor signs a legitimate contract that is fair to both parties and that the minor chose to sign him/herself and the minor paid money and used the product, the minor will not be able to recover the amount initially paid without compensating the vendor for the use of the product.

o If the minor has been taken advantage of, the contract will not be valid.

• Rule created because many minors transact a lot of business for themselves long before they’ve reached the age of legal majority.

o Minors work and spend their own money. o Wrong to teach minors that they can buy something, use it

until it is worn out and destroyed, and then think they can go back and compel the vendor to refund them their original purchase price.

Young v. Weaver (Text) Chapter 14 Contracts: Capacity• Facts

o In the fall of 2001, Kim Young, who at the time was 18 and had been living with her parents her entire life, decided to move out.

o Young and a friend Ashley Springer, also a minor at the time, signed a contract for the lease of an apt with Phillip Weaver on September 20, 2001. No adult signed the lease as a guarantor.

o Young was employed full time when she entered into the lease. Young paid a security deposit of $300 and paid rent of $550 per month. Lease set to expire on July 31, 2002.

o Young and Springer moved in in late September and paid rent at the agreed upon rate. They continued to live in the apt during October and most of November 2001.

o Young moved out near the end of November and returned to live with her parents. Young paid the full amount of her portion of rent for October and November, but stopped making any rent payments after she moved out of the apt.

Young had a dog in the apt that damaged part of the floor and bathroom door in the apt, causing $270 in damage. Young did not pay for this damage before vacating the apt.

o Weaver managed to rent the apt to someone else in June 2002. Weaver filed a claim against Young in small claims, seeking damages for the unpaid rent and the damage done by Young’s dog to the apt.

o Court ruled in favor of Weaver and awarded $1,370 in damages.o Young appealed in Tuscaloosa Circuit Court which retried the case and ruled in

favor of Weaver and awarded him $1,095, the amount of the unpaid rent for December 2001 and January and February 2002 as well as the damage caused by Young’s dog.

o Young appealed• Issues

o Was the apartment a necessity for Young? (who was a minor at the time she signed her lease)

• Holdings

Jordan v. Knafel (Supp.) Chapter 13 Contracts: Reality of Consent• Facts

o In the spring of 1989, Karla Knafel, a singer, was performing in a band at a hotel in Indianapolis, Indiana. After one of her performances, she was introduced to Michael Jordan, who invited her to meet with him but which she declined. She and Jordan continued long-distance telephone conversations during that time.

o In December of 1989, three months after Jordan had married his wife, Knafel traveled to Chicago to meet Jordan, where they had unprotected sex.

They had uprotected sex again in November 1990o In early 1991, Knafel found out that she was pregnant, she was convinced

the baby was Michael Jordans but kept silent for some time. The Bulls were heading towards their first championship and

Jordan was earning large sums on product endorsements. Knafel alleged that Jordan was “troubled” when she told him she was pregnant with his child in the spring of 1991.

She also alleged that Jordan demanded that she abort the baby, but she refused because of her personal beliefs.

o According to Knafel, she and Jordan had several conversations regarding the impending birth of the baby. In the Spring of 1991, Jordan offered and urged Knafel to accept his proposed settlement agreement to resolve their problems.

Jordan offered to pay her $5 million when her retired from the NBA in return for her agreement not to file a paternity suit against

him and for her agreement to keep their romantic involvement publicly confidential.

• Knafel accepted Jordan’s offer. In consideration for his promise to pay her, she agreed to forbear filing a public paternity action against him and agreed to keep their romantic relationship confidential.

o In July 1991, Knafel’s child was born. Jordan paid certain hospital bills and medical costs and paid Knafel $250,000 for “her mental pain and anguish arising from her relationship with him.”

Knafel did not file a paternity suit against Jordan and kept their relationship confidential.

A month after Knafel’s baby birth, a physician collected blood samples from Jordan, Knafel, and the baby and concluded that the “test excluded Mr. Jordan from being the father of the baby.”

o In October 1993, Jordan announced his retirement from the Bulls, he returned to the NBA in March 1995. Knafel had not contacted Jordan to demand her payment of the $5 million, which he had allegedly promised her until the summer of 1998, amid public speculation that Jordan would soon retire again.

Knafel approached Jordan while he was vacationing in Las Vegas and allegedly reminded Jordan of their $5 million agreement. Knafel alleged that Jordan reaffirmed his agreement to pay. A few months later, Jordan again retired from the NBA.

o 2 years later after Jordan had failed to pay the $5 million under the alleged agreement, Knafel’s counsel contacted Jordan’s counsel to resolve their contract dispute.

Jordan fired for declaratory judgment alleging that Knafel was attempting to extort $5 million from him and that, even if an agreement was made, the agreement was unenforceable because of fraud and mutual mistake.

• Knafel fired a counterclaim for breach of contract and Jordan filed a motion to dismiss the claim.

o The trial court dismissed Jordan’s complaint and also dismissed Knafel’s counterclaim. Both parties appealed.

o The Illinois court of Appeals reversed and remanded the case to the trial court for further proceedings. On remand, Jordan filed an amended complaint and motion for summary judgment on Knafel’s counterclaim.

Jordan included an affidavit of the doctor who had done the genetic testing on Knafel’s baby

Knafel filed an affidavit stating that she had believed in good faith that she was pregnant with Jordan’s child, that she had informed Jordan throughout their relationship that she was having sex with another man, and that she had never told Jordan that she was using birth control.

• Also included note from her physician stating that the baby was conceived on November 19 or 20, 1990, which was the same time period that she was with Jordan in Phoenix.

o After hearing, trial court granted Jordan’s motion for summary judgment. Knafel appealed

• Issueso Is the contract Jordan made with Knafel enforceable or is it not because

Knafel committed fraud• Holdings

o Affirmed in favor of Jordan Knafel argues that it doesn’t matter that it isn’t Jordan’s child as

long as she had a good-faith belief that at the time of contracting, she was pregnant with Jordan’s child.

Jordan maintains that he is not the father stating the paternity tests and other evidence, Knapel’s statement to him at the time of the alleged settlement was that “she was pregnant with his child” is a fraudulent misrepresentation as a matter of law which makes the contract voidable, permitting rescission.

In order for Fraud to be used as a defense: 4 things must be satisfied

• The party seeking fraud must establish that the representation was (1) one of material fact; (2) made for the purpose of inducing the other party to act; (3) known to be false by the maker, or not actually believed by him on reasonable grounds to be true, but reasonably believed to be true by the other party; (4) was relied upon by the other party to his detriment

o To be material, the representation need not have been the “paramount or decisive inducement, so long as it was a substantial factor.”

Knafel asserts that there is a genuine issue of fact as to whether her affirmative representation to Jordan that “she was pregnant with his child” was material to the alleged settlement agreement and induced Jordan to act. (1)

• She argues that Jordan’s actual paternity (1) was not a subject of discussion when they reached their agreement (2) it was not a term or contingent condition of their settlement agreement (3) Jordan never stated that it was material to the agreement

o She maintains that Jordan only settled in order to preserve his image and protect his lucrative endorsements.

o A misrepresentation is “material” if the party seeking rescission would have acted differently had he been aware of the fact or if it concerned the type

of information upon which he would be expected to rely when making his decision to act

Contrary to her assertions, her own allegations establish that paternity was material to the alleged settlement agreement and was made for the purposes of inducing Jordan to act. (2)

• Ex. when she told Jordan she was pregnant, Jordan became worried

• Ex. she refused an abortion and that’s when Jordan proposed settlement

Although a general fear of public exposure of their relationship may well have been a factor when Jordan proposed the settlement, it was not Jordan’s only inducement (incentive)

• Her statement to Jordan that he was the father was indeed material and a substantial factor in inducing Jordan to act.

• If Jordan’s paternity was immaterial to the parties’ settlement agreement, then her claim that she had a good-faith basis for a paternity action against Jordan would be unfounded.

o Without a good-faith basis, there would have been no consideration therefore no contract

Jordan’s paternity must have been material to a good-faith settlement of her paternity claim

Was Knafel’s representation known to be false or not reasonably believed to be true at the time of the alleged agreement (3)

• Knafel told Jordan with certainty that he was the father of her child yet paternity testing revealed that someone else was the father. Therefore she must have lacked certainty about the paternity of the child when she told Jordan that he was the father. Knafel’s knowledge of her uncertainty regarding paternity satisfies the “knowledge” element of fraudulent misrepresentation

Was Jordan reliant upon Knafel to his detriment (4)• Jordan was reliant on the fact that he was the father and

therefore he agreed to pay the settlement. If Jordan was not the father, he wouldn’t have agreed to any settlement.

• The reliant statement was fraudulent therefore Jordan had the right to void it.

Estate of Nelson v. Rice (Supp.) Chapter 13 Contracts: Reality of Consent• Facts

o Martha Nelson died in 1996 and Kenneth Newman and Edward Franz were appointed co-personal representatives of her estate.

o Newman and Franz hired Judith McKenzie-Larson to appraise the estate’s personal property in preparation for an estate sale. McKenzie-Larson told

them that she did not appraise fine art, and that if she saw any, they would need to hire an additional appraiser.

o ML did not report finding any fine art, and relying on her silence and appraisal, Newman and Franz priced the personal property and held an estate sale.

o Carl Rice responded to the newspaper ad for the sale and bought 2 oil paintings for a total of $60. Rice had bought art in the past but was not an educated purchaser and never made more than $55 on any single piece, and had bought many pieces that turned out to be frauds, forgeries, or the work of lesser artists.

o Rice sent copies of the art to get appraised by Christie’s in New York. Christie’s identified the paintings and offered to sell them on consignment. The paintings sold at auction for $1,072,000, with $911,780 going to Rice in the sale.

o Newman and Franz learned about the art sale in 1997 and sued ML on behalf of the estate believing that she was responsible for the estate’s loss.

They settled the following November because ML had no assets. o In January 1998, the estate sued the Rices, alleging that the sale contract

should be rescinded or reformed because of mistake and unconscionability.

Estate moved for summary judgment, arguing that the parties were not aware that the transaction had involved fine art, believing instead that the paintings were relatively valueless decorations.

The Rices filed a cross-motion for summary judgment arguing that the estate bore the risk of the mistake.

o The trial court denied the estate’s motion for summary judgment arguing that the estate bore the risk of the mistake

o The trial court denied the estate’s motion for summary judgment and granted the Rice’s cross-motion.

o The estate’s motion for a new trial was denied, and the estate appealed.• Issues

o Can the estate rescind the contract made with Rice for the fine art paintings

• Holdingso Affirmed in favor of the Rices

In concluding that the estate was not entitled to rescind the sale, the trial court found that, although a mistake had existed as to the value of the paintings, the estate bore the risk of that mistake.

In his deposition, Newman testified that he had not been concerned that ML had no expertise in fine art, believing the estate contained nothing of significant value except the house and the Indian art collection.

• Newman and Franz relied on ML to tell them if they needed an additional appraiser for fine art. Because ML didn’t say anything, they didn’t hire a fine art appraiser.

o However, by relying on someone who was unqualified to appraise fine art to determine its existence, the representatives consciously ignored the possibility that the estate’s assets might include fine art, thus assuming that risk.

Radford v. Keith (Supp.) Chapter 13 Contracts: Reality of Consent• Facts

o In 1999 Donald Keith and Donald W. Keith & Associates and Marlene Radford entered into a written contract for the construction of a house for Radford. The total amount of the contract was $165,000. However, the contract provided that the price could be adjusted for changes to the building plan made by either party, such as a price increase for changes requested by Radford.

o The construction was financed by a joint construction loan issues to both Keith and Radford.

o When the home was completed, a closing was scheduled. Approx. 1 week before the closing, Keith telephoned Radford and demanded a meeting with him in his office.

o During this meeting, Keith informed Radford that there were “big problems” that could prevent her from closing on her loan. He accused Radford of fraud and told her that he would sign a document that could prevent the closing from going forward.

o Keith then gave Radford several choices, such as going to court to settle the matter or signing a Note and Deed of Trust promising to pay Keith an additional $25,715. Keith instructed one of his associates to stand outside the door to his office for two hours to be sure that they were not interrupted.

Prior to meeting with Keith, Radford had made arrangements for her personal belongings to be delivered to the new residence and she had executed a notice to vacate her rental unit. As a result, she was concerned that she would be displaced if Keith’s actions prevented her from closing on the loan.

According to Radford, Keith threatened to sue her and she thought that her only option was to sign the note in order to close in a timely manner.

She signed the Note and Deed of Trust. o Radford later filed suit against Keith and his company, claiming duress

and seeking to rescind the note and cancel the deed of trust. The jury found sufficient evidence of duress and returned in favor

of Radford.o Keith and his company moved for a directed verdict (when judge rules

over jury) and a judgment notwithstanding the verdict at the close of trial. The trial court denied both motions

o Keith and his company appealed

• Issueso Did Radford have the right to rescind the note and cancel the deed of trust

due to duress caused by Keith• Holdings

o Affirmed in favor of Radford Duress exists where one, by the unlawful act of another, is induced

to make a contract or perform or forego some act under circumstances which deprive him of the exercise of free will.

• A wrongful act or threat is an important element of duress. In proving a case of duress, a plaintiff must satisfy 3 required

elements• In the case, there was evidence that (1) Keith’s actions were

unlawful or wrong (2) Radford was induced to sign the note (3) Keith prevented Radford from exercising her free will to leave defendants’ office.

• Supreme Court says – the act done or threatened may be wrongful even though it is not illegal. The threat to institute legal proceedings which might be justifiable per se, may become wrongful within the meaning of this rule if made with the corrupt intent to coerce a transaction grossly unfair to the victim and not related to the subject of such proceedings.

o Keith’s threat to initiate legal procedures may have been legal but his methods were such that a jury could determine that his actions were unfair to Radford so as to rise to the level of a wrongful act.

Keith’s motives were to coerce Radford into agreeing to the additional note.

• The Jury could determine that the defendant coerced Radford to execute the note. An inducement that causes performance of some act, serves as the second element of duress.

• Jury could determine that Radford was not free to leave Keith’s office and she was detained in Keith’s office for several hours, that Radford was emotionally upset by the tone of the meeting, and that Radford did not have counsel present to advise her.

Sporer v. UAL Corp. (Text) Chapter 51: Employment at Will• Facts

o Ken Sporer worked as a mechanic for UAL from 1987-1998, at which point he became a supervisor. As a mechanic he was a member of the collective bargaining unit; however, supervisors were not part of the union and so were not governed by the collective bargaining agreement. UAL’s policies indicated that supervisors were at-will employees.

o UAL’s email policy provided: Message content must always be professional. It is strictly prohibited to transmit or stare any messages or data that compromises or embarrasses the Company, contains explicit or implicit threats, obscene, derogatory, profane or otherwise offensive language or graphics, defames, abuses, harasses, or violates the legal rights of others.

In addition, other UAL policies prohibit the transmission of obscene, derogatory, profane, or otherwise offensive language or graphics.

o Sporer was aware of these policies. When he used his work computer, a warning notice appeared on the screen when he turned it on. To clear the warning notice, Sporer has to click OK on the screen.

o In October 2002, Sporer was counseled when UAL’s Information Security Department discovered he had sent an inappropriate e-mail from his work account. The e-mail, entitled “skeleton fun”, contained a video of skeleton cartoon figures engaging in sexual intercourse.

o Despite that reprimand, roughly five years later Sporer sent another inappropriate message from his UAL e-mail account to his personal account. In August 2007, Sporer’s friend Harry Clancy sent him an e-mail entitled “Amazing oral talent” on his work e-mail account. The e-mail contained a pornographic movie. A few minutes after transmitting the e-mail to his personal e-mail account, Sporer e-maled Clancy, writing “Thank you for the spiritual lift. However, I need you to use my home e-mail address…Apparently UAL has a strict computer security policy and these babies will get me fired.”

o Once again, Information Security discovered the e-mail. Pursuant to UAL’s Zero Tolerance Policy on Harassment and Discrimination and its Code of Conduct, UAL terminated Sporer’s employment

o Sporer sued UAL alleging wrongful termination and invasion of privacy in California. UAL moved for summary judgment.

• Issueso Was Sporer terminated wrongfully (Breach of Implied Contract & Termination of

Public Policy)• Holding

o Court Grant’s UAL’s motion for summary judgment Sporer’s Claim for Breach of Implied Contract Fails

• Under California law, an at-will employment relationship may be terminated by either party, at any time, without cause, for any or no reason.

• Sporer claims that several changes in his status with UAL redefined his employment relationship. Sporer developed an understanding that no one at UAL was terminated without good cause.

o But he did not submit any evidence to support his subjective belief that he could only be terminated for cause.

• Court determines that Sporer has not submitted sufficient evidence to establish any agreement not to terminate him without good cause.

Sporer’s Claim for Termination in Violation of Public Policy Fails• To succeed on a claim for wrongful termination in violation of

public policy, a plaintiff must demonstrate that his or her termination involved a matter “that affects society at large rather than a purely personal or proprietary interest of the plaintiff or employer”

• Cases in which courts have found violations of public policy generally fall into 4 categories: (1) refusing to violate a statute (2) performing a statutory obligation (3) exercising a statutory right or privilege (4) reporting an alleged violation of a statute of public importance.

• Sporer contends that his termination was wrongful because it was in violation of his right to privacy and in violation of the deferral wiretap law which prohibits the interception and disclosure of wire, oral, or electronic communications.

o To establish an invasion of privacy under California law, a plaintiff must demonstrate “(1) a legally protected privacy interest, (2) a reasonable expectation of privacy in the circumstances (3) conduct by defendant constituting a serious invasion of privacy.

o California courts have previously determined that “the use of computers in the employment context carries with it social norms that effectively diminish the employee’s reasonable expectation of privacy.”

In 2001, more than ¾ of major firms in the U.S monitor employee communications and activities on the job

• Having the opportunity to consent to such monitoring, further diminishes any reasonable expectation of privacy.

o UAL had a policy of monitoring its employee’s computer use, warned employees that they had no expectation of privacy on e-mail transmited on the company system, and provided employees with a daily opportunity to consent to such monitoring.

o Sporer failed to submit any evidence to the contrary, and the Court finds that Sporer had no reasonable expectation of privacy in the use of his work e-mail.

Sporer knew, because of his prior incident, that UAL monitors work e-mail accounts. Sporer knew that his work account was not private and was being monitored by UAL, and thus his consent may be implied. Accordingly, UAL did not violate the federal wiretap law by monitoring Sorer’s work e-mail.

Felley v. Singleton (Supp.) Chapter 20 Product Liability• Facts

o On June 8, 1997 Brian Felley went to the home of Thomas and Cheryl Singleton to look at a used car that the Singletons had offered for sale.

o The car, a 1991 Ford Taurus, had approximately 126,000 miles on it. Felley test drove the car and discussed the conditions with the Singletons.

The Singletons told Felley that the car was in “good mechanical condition” and that they had experienced no brake problems.

• This was a primary consideration for Felleyo Felley purchased the car for $5,800.

Soon after, Felley began experiencing problems with the car.• On the second day after he bought it, he noticed a problem with the

clutch. Over the next few days the clutch problem worsened to the point where he had to pay $942.76 for the removal and repair of the clutch.

Within the first month that Felley owned the car, it developed serious brake problems which cost more than $1,400 to repair.

o Felley brought a small claims action against the Singletons, claiming that they had made and breached an express warranty to him.

At trial, an expert witness testified that based on his examination of the car and discussionwith Felly about the car and other factors, it was his opinion that the car’s brake and clutch problems probably existed when Felley bought the car.

o The trial court ruled in Felley’s favor and ordered the Singletons to pay him $2,343.03

The Singleton’s appealed • Issues

o Did the statements that the Singleton’s made regarding the condition of the car constitute an expressed warranty.

• Holdingo Judgment in favor of Felley confirmed

Singleton’s argued on appeal that their statements were nothing more than expressions of opinion in the nature of puffery that could not properly be deemed an express warranty.

Express warranties by the seller are created as follows:• (1) Any affirmation of fact or promise made by the seller to the

buyer which relates to the goods and becomes part of the basis of the bargain creates an express warranty that the goods shall conform to the affirmation or promise.

• (2) It is not necessary to the creation of an express warranty that the seller use formal words such as “warrant” or “guarantee” or that he have a specific intention to make a warranty, but an affirmation merely of the value of the goods or a statement purporting to be merely the seller’s opinion or commendation of the goods does not create a warranty.

Singleton’s point to subsection (2) of section 2-313 as support for their argument that ther statements to Felley did not constitute an express warranty.

Precedent: Wang vs. Allison – involved the sale of a 10-year old car for $800, sellers told the buyer that the car was mechanically sound, in good condition, and had no problems. When buyers attempted to drive the car home it failed to operate properly, an inspection at an automobile dealership determined that there were problems that would cost $1500 to fix.

• Trial court ruled that these promises could not be a part of the basis of the bargain unless the buyer relied on them and that no one could reasonably rely on such statements with respect to such a car.

• Appellate court disagreed with the trial court’s decision and determined that the representations made by the sellers were affirmations of fact that created an expressed warranty.

o Court stated that affirmations of fact made during a bargaining process regarding the sale of goods are presumed to be part of the basis of the bargain unless clear affirmative proof to the contrary is shown.

• That a showing of reliance on the affirmations by the buyer is not necessary for the creation of an expressed warranty

o The seller has the burden to establish by clear affirmative proof that the affirmations did not become a clear basis of the bargain.

o Seller may be responsible for breach of warranty if the affirmations are a basis of the bargain and the goods fail to conform to the affirmations.

In a used car sale, representations of the seller such as, “the car is in good mechanical condition” are presumed to be affirmations of fact that become part of the basis of the bargain. Because they are presumed to be a part of the basis of the bargain, such representations constitute expressed warranties, regardless of the buyer’s reliance on them unless sellers show by clear affirmative proof that representations did not become part of the basis of the bargain.

Undisputed that Felley asked Singletons about the mechanical condition of the car, and the Singletons responded that the car was in good mechanical condition.

• Singleton’s representations are presumed to be affirmations of fact that became a basis for the bargain.

• Singletons did not make a clear affirmative showing that their representations did not become part of the basis of the bargain.

Hong v. Marriott Corp. (Supp.) Chapter 20: Product Liability• Facts

o Yong Cha Hong bought take-out fried chicken from a Roy Rogers family restaurant owned by the Marriot Corporation.

o While eating a chicken wing from her order, she bit into an object that she perceived to be a worm. Claiming permanent injuries and great physical and emotional upset from this incident, Hong sued Marriott for $500,000 in federal district court under the implied warranty of merchantability.

o After introducing an expert’s report alleging that the object in the chicken wing was not a worm, Marriot moved for summary judgment. It claimed that the case involved no disputed issues of material fact, and that there was no breach of the implied warranty of merchantability as a matter of law.

• Issues o Does Maryland law provide a breach of warranty for personal injury flowing from

an unexpected encounter with an inedible part of the chicken’s anatomy in a piece of fast food fried chicken?

• Holdingo Marriot’s motion for summary judgment denied

Marriot claims that there can be no recovery unless the offending item was a foreign object (not part of the chicken itself)

In many cases that have denied (implied) warranty recovery as a matter of law, the injurious substance was, as in this case, a natural part of the edible item consumed. But in all these cases, the natural item was reasonably to be expected in the dish by its very nature, under the prevailing expectation of any reasonable consumer.

• This “reasonable expectation” test has been adopted in a number of cases.

o The reasonable expectation test has largely displaced the foreign-natural test adverted to by Marriott.

Court cannot conclude that the presence of a trachea or an aorta in a fast good fried chicken wing is so reasonably to be expected as to render it merchantable, as a matter of law.

• This is not like the situation in a previous case involving one centimeter bone in a piece of fried fish. Everyone knows that tiny bones may remain in even the best filets of fish.

Jury must determine whether a piece of fast food fried chicken is merchantable if it contains an inedible item of the chicken’s anatomy.

Daniell v. Ford Motor Co. (Supp.) Chapter 20: Product Liability• Facts

o Connie Daniell attempted to commit suicide by locking herself inside the trunk of her 1973 Ford LTD.

Daniell remained in the trunk for 9 days, but survived after finally being rescued.

o Later, Daniell sued Ford in negligence to recover for her resulting physical and psychological injuries. She contended that the LTD was defectively designed because its trunk did not have an internal release or opening mechanism.

She also argued that Ford was negligently failing to warn her that the trunk could not be unlocked from within.

o Ford moved for summary judgment• Issues

o Was Ford’s trunk design defective and was ford liable for negligently failing to warn Daniell that the trunk could not be unlocked from the inside

• Holdingo Ford’s motion for summary judgment granted; Daniell loses.

A risk is not foreseeable where a product is used in a manner which could not reasonably be anticipated by the manufacturer and that use is the cause of the plaintiff’s injury.

Prupose of trunk is to transport, stow, and secure the spare tire, luggage, and other goods and to protect those items from the weather.

Design features of a trunk make it near impossible that an adult intentionally would enter the trunk and close the lid.

Since the plaintiff used the trunk as a means to attempt suicide, it was an unforeseeable use as a matter of law. Therefore, the manufacturer had no duty to design an internal release or opening mechanism that might have prevented this occurance.

Nor did the manufacturer have a duty to warn the plaintiff of the danger of her conduct, given the plaintiff’s unforeseeable use of the product.

• In addition, no duty to warn of known dangers.

Gonzales v. Raich (Text) Chapter 3: Business and the Constitution• Facts• Issues• Holdings

Granholm v. Heald (Supp.) Chapter 3: Business and the Constitution• Facts• Issues• Holdings

Bad Frog Brewery v. New York (Supp.) Chapter 3: Business and the Constitution• Facts

• On the label of Bad Frog brands, there is a picture of a frog “giving the finger”• There are also negative messages on the label like “He just don’t care” • 1996- The NY State Liquor Authority (NYSLA) for brand label approval and

registration denied Bad Frog’s application o the authority found that the label “encourages combative behavior”

“He just don’t care” slogan may entice underage drinking etc. Also, approval of the label would allow this brand to be placed in

grocery stores where children would be exposed to it

Viewed the gesture of flicking someone off as insulting and one that could lead to violence

• Bad Frog sought preliminary injunction barring the NYSLA from taking steps to prohibit the sale of beer by Bad Frog

• District Court denied the motion • Bad Frog appealed the District Court decision

• Issueso Is it lawful for NYSLA to reject Bad Frog’s application for approval of its labels? o Would the prevention of selling this beer with the current label restrict Bad Frog

from utilizing its first amendment rights (of Free Speech)

• Holdingso NYSLA has unlawfully rejected Bad Frog’s application for approval of its label’s.

Central Hudson Test – the central Hudson test sets forth the analytical framework for assessing governmental restrictions on commercial speech

• Has 4 partso Lawful Activity and Not Deceptive – court agrees that

Bad Frog’s labels pass the requirement that the speech “must concern lawful activity and not be misleading” the consumption of beer is legal in New York, and the labels cannot be said to be deceptive, even if they are offensive

o Substantive State interests – does banning Bad Frog: Protect children from vulgar and profane

advertising Act consistently with State’s interest to promote

temperance (i.e. the moderate and responsible use of alcohol among those above the legal drinking age and abstention among those below the legal drinking age.)

o Direct Advancement of the State Interest – to meet this requirement, a state must demonstrate that “the harms it recites are real and that its restriction will in fact alleviate them to a material degree.

Advancing the interest in protecting children from vulgarity – barring Bad Frog cannot realistically be expected to reduce children’s exposure to such displays to any significant degree.

Advancing the state interest in temperance – NYSLA has not established that its rejection of Bad Frog’s application directly advances the state’s interest in temperance

o Narrow Tailoring - is prohibition more extensive than necessary to serve the asserted state interest. NYSLA has not shown how the ban would advance state interest and court believes that there are less extensive alternatives.

Kasky v. Nike Inc. (Supp.) Chapter 3: Business and the Constitution• Facts

o Nike mounted a public relations campaign in order to refute news media allegations that its labor practices overseas were unfair and unlawful. This campaign involved many types of media

o Relying on California statues designed to curb false and misleading advertising and other forms of unfair competition, California Resident Mark Kasky filed suit in a California court on behalf of the general public of the state.

Kasky contended that Nike had made false statements in its campaign.o Nike objected on the ground, among other, that the 1st amendment barred Kasky’s

action. o The court, holding Nike’s campaign to be fully protected under the First

Amendment as noncommercial speech, sustained Nike’s objection and dismissed Kasky’s complaint.

o Kasky appealed and the California Court of Alleal affirmed. The supreme Court of California granted Kasky’s petition for review

• Issueso Was Nike’s campaign fully protected under the First Amendment as

noncommercial speech• Holdings

o Court of Appeal decision reversed and case remanded Categorizing a statement as commercial or noncommercial speech requires

consideration of three elements: the speaker, the intended audience, and the content of the message.

• In typical commercial speech cases, the speaker is likely to be someone engaged in commerce, the intended audience is likely to be actual or potential buyers or customers of the speaker’s goods or services, and the factual content of the message should be commercial in character made for the purpose of promoting sales of, or other commercial transaction in, the speaker’s products or services.

o Nike’s statements meet all of the requirements needed for it to be commercial speech.

• Nike argues that its statements were not commercial speech because they were part of an “international media debate on issues of intense public interest.”

o Argument falsely assumes that speech cannot properly be categorized as commercial speech if it relates to a matter of significant public interest or controversy.

o In this case, all of Nike’s alleged false and misleading statements relate to the commercial portions of the speech in question.

• Court also rejects Nike’s argument that regulating its speech to suppress false and misleading statements is impermissible because

it would restrict or disfavor expression of one point of view (Nike’s) but not the other point of view (that of the critics of Nike’s labor practices because the regulations in question do not suppress points of view but instead suppress false and misleading statements of fact.

Nike’s statements were commercial speech, not non-commercial speech, and therefore only get limited protection instead of full protection from the constitution.

Matthews v. Eldridge (Supp.) Chapter 3: Business and the Constitution • Facts

o Cash benefits are provided to workers during periods in which they are completely disabled under the disability insurance benefits program created by the Social Security Act.

o Eldridge was awarded disability benefits. 4 years later, Eldridge completed a questionnaire indicating that his condition had not improved and identifying the medical sources from whom he had recently received treatment.

o After considering these reports and other information, the state agency informed Eldridge by letter that his disability had ceased.

o Eldridge commenced an action challenging the constitutional validity of the administrative procedures. In support of his contention that due process requires a predetermination hearing, Eldridge relied exclusively on the precedent which established a right to an “evidentiary hearing” prior to termination of welfare benefits.

o District Court concluded that the administrative procedures pursuant to which Eldridge’s benefits were terminated abridged his right to procedural due process.

o The court of appeals affirmed. Case was appealed to U.S Supreme Court.• Issues

o Whether the Due Process Clause of the 5th amendment requires that prior to the termination of Social Security benefit payments the recipient be afforded an opportunity for an evidentiary hearing.

• Holdingso Judgment for the Court of Appeals reversed

Eligibility for disability benefits, in contract to welfare benefits, is not based upon financial need. Indeed, it is wholly unrelated to the worker’s income or support from many other sources.

An additional factor to be considered here is the fairness and reliability of the existing predetermination procedures. The predetermination procedures of disability are more sharply focused and easily documented than the typical determination of welfare entitlement.

• For welfare, a wide variety of information may be deemed relevant, and issues of witness credibility and veracity often are critical to the decision-making process

• In contrast, the decision whether to discontinue disability benefits will turn, in most cases, upon “routine, standard, and unbiased

medical reports by physician specialists,” concerning a subject whom they have personally examined.

The detailed questionnaire given to recipients is detailed and particular in regards to the relevant evidence, and combined with the opinion of the unbiased, treating physician, is a fair and reliable evaluation.

A further safeguard exists that allows the recipient to see the summary of evidence the agency used in its decision so that the recipient may challenge the decision with additional evidence.

The ultimate additional cost, both in terms of money and administrative burden, is too substantial.

Court concludes that an evidentiary hearing is not required prior to the termination of disability benefits and that the present administrative procedures fully comport with due process.